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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of June 2000
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PETROLEUM GEO-SERVICES ASA
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(Translation of registrant's name into English)
Strandveien 50E
P.O. Box 89
N-1325 Lysaker
Norway
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
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[Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.]
Yes No X
--- ---
THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE IN
THE REGISTRATION STATEMENT OF PETROLEUM GEO-SERVICES ASA ON FORM S-8 (SEC
REGISTRATION NO. 333-6420) AND IN THE PROSPECTUSES CONSTITUTING PART OF THE
REGISTRATION STATEMENTS OF PETROLEUM GEO-SERVICES ASA ON FORM F-3 (SEC
REGISTRATION NOS. 333-90379, 333-9518 AND 333-9520) AND PART OF THE REGISTRATION
STATEMENT OF PETROLEUM GEO-SERVICES ASA ON FORM F-4 (REGISTRATION NO. 333-9702).
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the discussion under this caption in conjunction with
our consolidated financial statements and the related notes we have previously
filed with the Securities and Exchange Commission and those included elsewhere
in this report. This discussion is based upon, and such financial statements
have been prepared in accordance with, United States generally accepted
accounting principles. The following information contains forward-looking
statements. You should refer to the section captioned "Forward-Looking
Information" in our most recent annual report on Form 20-F for cautionary
statements related to forward-looking statements.
First Three Months of 2000 Compared with First Three Months of 1999
Revenue for the three months ended March 31, 2000 totaled $212.7
million, an increase of 43% over revenue of $148.7 million for the corresponding
period of 1999. The geophysical services group contributed $101.7 million of
2000 first quarter revenue, an increase of $29.2 million over revenue of that
group for the same period of 1999, reflecting the early stages of recovery in
the demand for oilfield services. Multi-client sales represented $56.3 million
of total geophysical services revenue for the 2000 first quarter, an increase of
$19.7 million over such revenue for the 1999 first quarter. Production services
revenue for the 2000 first quarter was $111.0 million, an increase of 46% as
compared to the same period of 1999. This increase resulted primarily from the
operations of the Petrojarl Varg, which we acquired in July 1999, and higher
revenue from the Ramform Banff, which began production on January 31, 1999.
Cost of sales increased $40.0 million, or 63%, from the first quarter
of 1999 to the first quarter of 2000. This increase resulted primarily from
greater activity in our production services business, as noted above, and an
increase in the portion of our geophysical services business performing contract
work. This latter factor resulted in a reduction of amounts allocated to the
multi-client library in the 2000 first quarter as compared to the same period of
1999.
Depreciation and amortization for the 2000 first quarter increased
$18.9 million, or 44%, from the same period of 1999. This increase was primarily
due to (1) greater amounts of amortization of our multi-client library (although
the amortization rate of 57% for the 2000 first quarter remained relatively
unchanged from prior periods) due to higher multi-client sales and (2) greater
activity in our production services business as noted above, partially offset by
lower depreciation on geophysical assets removed from service during 1999 as
part of our restructuring efforts.
Selling, general and administrative costs increased 5% from the 1999
first quarter to the 2000 first quarter. As a percentage of revenue, these costs
declined to 9% in the 2000 first quarter from 12% in the 1999 first quarter. The
increase was generally due to increased activity in the production services
business in the 2000 first quarter as compared to the same period of 1999.
There were no unusual items during the first three months of 2000. Net
unusual items for the first three months of 1999 included $52.1 million in
employee termination costs, lease termination/revision costs, vessel derigging
costs and equipment impairments directly related to restructured operations, and
$8.9 million in asset impairments caused by market conditions at that time.
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Operating profit for the three months ended March 31, 2000 was $27.1
million, resulting in an operating profit margin of 13%, essentially unchanged
from the same period of 1999 before unusual items. For the three months ended
March 31, 2000, operating profit from the geophysical services and production
services segments was $6.4 million and $20.7 million, respectively.
Net financial expense for the 2000 first quarter was $10.3 million
higher than the comparable 1999 first quarter expense. The increase resulted
primarily from the issuance in July 1999 of $200.0 million principal amount of
senior notes and generally higher levels of indebtedness during the 2000 first
quarter than in the corresponding period of 1999.
Other income, net for the three months ended March 31, 2000 decreased
$8.3 million as compared to the same period of 1999. Other income, net for the
first quarter of 1999 included a $9.4 million U.K. lease gain associated with
the Ramform Victory, which was delivered in January 1999.
An income tax benefit was provided on current losses from operations as
a result of (1) losses relating to operations in high-tax rate jurisdictions
resulting from the current conditions in the oilfield services market, and (2)
significant income earned in low or no-tax rate jurisdictions. We expect to
continue recording tax benefits as long as market conditions remain depressed.
FINANCIAL CONDITION
Capital Requirements
Our future capital requirements consist primarily of capital
expenditures related to:
o seismic vessels and equipment
o floating production, storage and offloading vessels and equipment
o investments in our 3D multi-client library
o computer processing, data management and reservoir monitoring
equipment
o working capital related to the growth and seasonal nature of our
business.
In prior years, our capital requirements have related not only to
normal, ongoing equipment replacement and refurbishment needs, but also to
increases in capacity. The most significant additions to capacity occurred in
our seismic data acquisition operations and floating production, storage and
offloading operations. During 2000, we expect to reduce significantly capital
expenditures related to capacity additions.
Capital expenditures of $20.1 million in the first quarter of 2000
related primarily to ongoing maintenance capital expenditures for our seismic
business and selected investments in our existing production services business.
During the first quarter of 2000, we invested $71.9 million in our
multi-client library, primarily in strategic, deepwater seismic surveys in
Brazil and in the West African and Asia Pacific regions. These investments
reflect our evaluation of the future market demand for non-exclusive surveys.
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Despite the recent volatility in the oil and gas environment, we
believe that our multi-client investment provides a valuable revenue base. All
of the seismic data in our multi-client data library is 3D or multi-component
geophysical data, and we have acquired approximately 93% of the data in the last
27 months. Most of our seismic data is located in deepwater areas in the Gulf of
Mexico, West Africa, Brazil, Norway, West of Shetlands, Egypt and Australia. In
addition, we maintain a sizeable database in the gas prone areas on the
continental shelves in the Gulf of Mexico, the UK sector of the North Sea,
Norway, Indonesia and certain areas in the Middle East. We believe our current
data library is one of the largest and newest 3D seismic databases available in
the industry.
A substantial amount of our capital expenditures and investment in our
multi-client library is discretionary, and we expect to reduce substantially
such expenditures and investments throughout 2000. In addition, we currently do
not have any major commitments for future capital expenditures. We intend,
however, to pursue additional opportunities to provide floating production,
storage and offloading systems and advanced geophysical services to our
customers. We expect that any investment in floating production assets will be
subject to obtaining long-term contracts for those assets.
Capital Resources and Liquidity
We have historically financed our activities through cash flows from
operations, bank credit facilities, equity financing and the issuance of debt.
At March 31, 2000, we had $210.0 million of available borrowing
capacity under our revolving credit facility.
We expect to finance our future capital expenditures, multi-client
investments and working capital needs through a combination of operating cash
flows, sales of non-core assets, bank credit facilities, equity offerings and
other debt financing. We cannot assure you that such sources of funds will be
available in the future or be available at costs acceptable to us. As a result,
in addition to analyzing operating market conditions and/or the award of
long-term contracts, we routinely analyze our available sources of financing
before committing to significant capital expenditures.
We believe that cash on hand, operating cash flows and available
borrowing capacity under our revolving credit facility will be adequate to meet
our current commitments for capital expenditures, anticipated multi-client
investments and working capital requirements.
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Petroleum Geo-Services ASA
Consolidated Income Statements (5)
<TABLE>
<CAPTION>
Quarter ended Year ended
March 31, December 31,
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(In thousands of dollars, except for share data) 2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
Revenue $ 212,730 $ 148,664 $ 788,160
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Cost of sales 102,712 62,741 333,060
Depreciation and amortization 61,640 42,710 238,576
Research and technology costs 2,657 5,669 15,859
Selling, general and administrative costs 18,580 17,767 71,738
Unusual items, net (1) -- 60,989 89,855
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Total operating expenses 185,589 189,876 749,088
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Operating profit 27,141 (41,212) 39,072
Financial expense, net (4) (29,937) (19,649) (95,969)
Other income, net (2) 2,811 11,127 18,715
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Income (loss) before income taxes and cumulative
effect of accounting change 15 (49,734) (38,182)
Provision (benefit) for income taxes (6,644) (15,299) (41,890)
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Income (loss) before cumulative effect
of accounting change 6,659 (34,435) 3,708
Cumulative effect of accounting change, net (3) -- (19,977) (19,977)
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NET INCOME (LOSS) $ 6,659 $ (54,412) $ (16,269)
============= ============= =============
Basic earnings (loss) per share before cumulative effect
of accounting change $ 0.07 $ (0.38) $ 0.04
Cumulative effect of accounting change, net (3) -- $ (0.23) $ (0.21)
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Basic earnings (loss) per share $ 0.07 $ (0.61) $ (0.17)
============= ============= =============
Diluted earnings (loss) per share before cumulative effect
of accounting change $ 0.06 $ (0.38) $ 0.04
Cumulative effect of accounting change, net (3) -- $ (0.23) $ (0.21)
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DILUTED EARNINGS (LOSS) PER SHARE $ 0.06 $ (0.61) $ (0.17)
============= ============= =============
Basic shares outstanding 101,596,483 89,547,805 94,767,967
------------- ------------- -------------
Diluted shares outstanding 102,656,325 89,547,805 95,840,199
============= ============= =============
</TABLE>
NOTES:
(1) Unusual items, net for the year ended December 31, 1999 includes $74.0
million (of which $52.1 million was incurred in the first quarter of 1999)
in employee termination costs, lease termination/revision costs, vessel
derigging costs and equipment impairments directly related to restructured
operations, as well as $15.9 million (of which $8.9 million was incurred in
the first quarter of 1999) in asset impairments necessitated by market
conditions.
(2) Other income, net for 1999 includes $19.1 million (of which $9.4 million was
received in the first quarter of 1999) in UK lease gains related to the
Ramform Victory and the Ramform Vanguard which were delivered in January and
April of 1999, respectively.
(3) Effective January 1, 1999, the Company adopted Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-up Activities." This SOP requires
that the initial, one-time costs related to introducing new products and
services, conducting business in new territories or commencing new
operations be expensed as incurred. Accordingly, the Company has recognized
a charge to income of $28.0 million ($20 million net of tax) as the
cumulative effect of the change in accounting principle.
(4) For information regarding $143.8 million liquidation amount of 9.625% trust
preferred securities issued by PGS Trust I, a statutory business trust
formed by the Company, see footnote (3) to the Consolidated Income Statement
contained in the Company's Report on Form 6-K dated October 22, 1999.
Financial expense, net for the first quarter ended March 31, 2000 and the
year ended December 31, 1999, includes $3.7 million and $7.7 million,
respectively, in minority interest expense related to the trust's
securities. The sole assets of the trust are junior subordinated debentures
of the Company that bear interest at the rate of 9.625% per year and mature
on June 30, 2039. As of March 31, 2000, the trust held $148.2 million
principal amount of such debentures.
(5) Certain reclassifications have been made to conform prior year amounts with
the current year presentation.
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Petroleum Geo-Services ASA
Consolidated Balance Sheets (5)
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands of dollars, except for share data) 2000 1999
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 64,233 $ 63,044
Accounts receivable, net 234,990 240,634
Other current assets 111,857 94,926
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Total current assets 411,080 398,604
Multi-client library, net 870,233 816,423
Property and equipment, net 2,405,153 2,429,848
Goodwill and other long-term assets, net 533,451 531,776
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TOTAL ASSETS $ 4,219,917 $ 4,176,651
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LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term debt and
capital lease obligations $ 20,533 $ 22,409
Accounts payable and accrued expenses 238,234 232,277
Income taxes payable 9,684 9,805
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Total current liabilities 268,451 264,491
Long-term debt 2,028,712 1,986,143
Long-term capital lease obligations 10,325 12,387
Other long-term liabilities 103,960 104,737
Deferred income taxes 79,852 79,852
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Total liabilities 2,491,300 2,447,610
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Commitments and contingencies
Guaranteed preferred beneficial interest in PGS junior
subordinated debt securities (4) 139,373 139,164
Shareholders' equity:
Common stock, par value NOK 5; issued & outstanding 101,759,837 and
101,609,587 shares at March 31, 2000
and December 31, 1999, respectively 70,218 70,126
Additional paid-in capital 1,210,337 1,208,873
Retained earnings 334,044 327,385
Accumulated other comprehensive loss (25,355) (16,507)
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Total shareholders' equity 1,589,244 1,589,877
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,219,917 $ 4,176,651
=========== ============
</TABLE>
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Petroleum Geo-Services ASA
Consolidated Statements of Cash Flows (5)
<TABLE>
<CAPTION>
Quarter ended Year ended
March 31, December 31,
-------------------------- ------------
(In thousands of dollars) 2000 1999 1999
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<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,659 $ (54,412) $ (16,269)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization charged to expense 61,640 42,710 238,576
Non-cash charges -- 81,050 83,805
Provision for deferred income taxes (6,644) (23,444) (53,471)
Working capital changes and other items (5,536) 48,084 (51,963)
----------- ----------- ------------
Net cash provided by operating activities 56,119 93,988 200,678
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in multi-client library (71,895) (103,641) (338,718)
Capital expenditures (20,092) (134,494) (667,869)
Cash acquired in purchase acquisition -- -- --
Other items, including net proceeds from UK leases (2,735) 7,170 5,496
----------- ----------- ------------
Net cash used in investing activities (94,722) (230,965) (1,001,091)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt 223,845 -- 195,712
Net proceeds from issuance of guaranteed preferred beneficial
interest in PGS junior subordinated debt securities -- -- 138,914
Net proceeds from issuance of common stock 1,555 248 220,024
Repayment of long-term debt (3,826) (7,019) (29,924)
Net increase (decrease) in revolving and short-term debt (179,909) 154,205 283,334
Principal payments under capital lease obligations (1,804) (5,076) (13,437)
Lease financing of owned equipment -- -- 15,512
----------- ----------- ------------
Net cash provided by financing activities 39,861 142,358 810,135
----------- ----------- ------------
Effect of exchange rate changes in cash and cash equivalents (69) 56 49
Net increase (decrease) in cash and cash equivalents 1,189 5,437 9,771
Cash and cash equivalents at beginning of period 63,044 53,273 53,273
----------- ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 64,233 $ 58,710 $ 63,044
=========== =========== ============
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PETROLEUM GEO-SERVICES ASA
(Registrant)
By: /s/ William E. Harlan
------------------------------------------
William E. Harlan
Vice President, Chief Accounting Officer
and Controller
Date: June 6, 2000
